IMF To Review Bahamas' Offshore Financial Services Sector

by Amanda Banks, Tax-news.com, London

06 June 2001

The Bahamas' Minister of Finance, Sir William Allen, has announced that he has invited the International Monetary Fund (IMF) to conduct a review of the Island's offshore financial services sector.

After last year's critical reports from the FATF and OECD which resulted in the blacklisting of The Bahamas both as uncooperative in the fight against money-laundering and as a 'harmful' tax haven, Sir William was quick to point out that the IMF review is by his invitation only and will be constructive advice for the government as opposed to the damaging effects of the multilateral reports. He explained: 'In its work [the IMF] is obliged to follow balanced, even-handed and objective procedures applicable to all participating member countries. In its reporting the IMF does not follow the obnoxious process of naming and shaming as the G-7 related groups have done.'

Sir William commented on the last Article IV Consultation with The Bahamas, which was conducted in August 1999, at which time it commended proposals in the 1999-2000 budget to generate more revenue by raising several taxes and reducing tax exemptions. The IMF concluded with the suggestion that a 'full review of the tax structure' be performed to further strengthen The Bahamas' revenue base. The Consultation recommended that 'such a review should include an assessment of the desirability of lowering import duty rates, introducing a value-added tax, or sales tax, and of increasing revenue from property taxes.'

Sir William said: 'The replacement of import taxes as the main form of taxation is inevitable in light of the WTO and other likely developments in trade liberalization. However any reform would have to be implemented gradually and in a way that does not alter the overall level of taxation.'

The IMF review is expected to take place some time this year or in the first quarter of 2002.

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